Kayzer Saba Page 1 7/4/2013 APPRECIATION OF WHAT SHOULD NOT BE FULLY-APPRECIATED A Summary of the Lecture of Dr. Raul V.

Fabella on The Peso Appreciation and Sustainability of Growth: Need We Worry? Written by: KAYZER ALDRIN ZAPLAN SABA Peso appreciation continues but no clear effect is felt by the common people. Reports about the increase in value of Philippine peso is being promulgated every now and then [in fact, in 2007, the Philippines had a 7.2 GNP growth];1 at the same time, ordinary residents continue to voice out grievances due to the increase in prices of goods and lack of stable job. An increase in the value of peso against dollar is said to be an indicator of a good economy, but to the people who do not feel its significance, it is nothing but an abstract without a definite picture. The Philippines remains an underdog of the First World Countries and has been static in its position as a developing country for more than three decades. No matter how the peso appreciates, its effect is not abrupt to the common people. Dr. Raul Fabella, a professor of economics at the University of the Philippines Diliman, cited in his lecture on Peso Appreciation that underdevelopment is a story not about the dearth of resources but about blown opportunities.2 The Philippines has diverse resources which is a potential source of raw materials and export goods; however, factors like risk in investments and foreign diplomacy hinder the Philippines from tapping and using its resources to stabilize the economy. Dr. Fabella used the quote about underdevelopment to emphasize that the current situation of the Philippines [has been classified developing for many years] is a result of missed opportunities, like the Japanese DFI in the 1980s, Borrowed Petrodollars in the 1970s, and the NAIA Terminal 3 Constructions; such opportunities should have triggered the economic transformation of the Philippines, but were not pursued.3 Many projects of past Philippine Presidents also seemed promising, but were not pursued and some were interrupted because of different perils. For example, Carlos P. Garcia promoted a significant program called the Filipino-First Policy. Filipino-First Policy was designed to promote Philippine-made products and to enhance both agriculture and economic industry.4 Industrialization was sought to be started by companies in the Philippines in order to lessen the import of machines and equipments which would benefit the country in the future if it would be successful; less amount would be allotted for import of steel because only the materials would be extracted abroad; the Filipinos were ought to create and to assemble the machineries. If Garcias Plan was successful, it would have been the countrys saving grace from poverty, which could be proven by different studies. Long-term projects, if promoted and succeeded, will be a big contribution to economic stability of the country, and the effects will be felt by the common people. History teaches but man never learns, a statement read by Dr. Raul Fabella to

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Taken from the lecture of Dr. Raul Fabella, Peso Appreciation and Sustainability of Growth: Need We Worry? Ayala Museum, 10 April 2008. 2 Ibid. 3 Ibid. 4 Teodoro Agoncillo, History of the Filipino People (Quezon City: Garotech, 1990), 470.

highlight his point on the mistakes that have been repeated by the Filipinos despite failures in the past; as mentioned, an example would be the different blown opportunities.5 At present, the Philippines is said to possess a changed landscape; the Philippines has a Fiscal consolidation, a better BOP with a lower inflation, a record level Forex reserve, and an Inflation Targeting program of the Bangko Sentral ng Pilipinas. Peso Appreciation is said to be used to lighten the burden of inflation.6 The reports sound good if the reality of poverty in the Philippines will be taken as consideration. The inflation rate may be lower and government organizations never cease to work for economic improvement, but the effects are not visible to many Filipinos. This is similar with the case of Peso Appreciation, the reports are convincing in words but the practical side does not show the peso is really appreciating. Inflation rate decrease and Peso Appreciation are merely figures but the reality about the living condition of the Filipinos is static, still meager and struggling for development. The Latin American Syndrome will explain that the strong currency is equal with strong economy;7 however, in the case of the Philippines, it should not be concluded that if the peso continues to appreciate and becomes stronger, the economy is also strong; this situation can be seen among the street children begging around the corners of Quezon Avenue and Paco, young men and women working and studying at the same time to live, and malnourished children and adults due to lack of money to purchase food and eat three times a day. The primary saviors of Philippine economy and the main characters for the Peso Appreciation are the Overseas Contract Workers; secondary factors are the Tradable Sector Shock and the BPO and Tourism.8 In this situation, most of the benefactors are the ones with an OFW family member, who benefit from a certain exchange rate of remittances. The OFW Families are also the ones affected if the value of peso depreciates [a reason why many of the families complain with the Peso Appreciation]. Most Filipinos who do not have an OFW family remain unaffected because prices of goods remain high and wages do not increase despite the appreciation. OFWs are affected by both appreciation and devaluation; if the peso devaluates the more OFWs are willing to remit because of the high exchange rate; if the opposite takes place, OFWs decide not to remit first until the rate is relatively good. The Philippines rely much on the remittances of the OFWs and considers this as a primary reason for Peso Appreciation. It shall be noted that the remittances of OFWs contribute to the economy in the sense that investors are attracted and Philippine peso becomes an attractive currency, but this fact is not sufficient to conclude that a strong economy exists in the Philippines because only few sectors are directly affected by this set-up. As Dr. Fabella mentioned, the said salvation by the OFWs of the economic condition is one-sided, OFW Families against all other Filipinos [which is not totally true]. 9 It is a fact that most of the OFWs do not really favor Peso Appreciation because of the low remittances, and personally favor the increase in dollar rate; on the other hand, the aforementioned all other Filipinos are not directly affected, whether an appreciation or devaluation occurs. In short terms, majority of the people do not experience anything but continuing crisis whether the peso appreciates or not. Changes are only evident in reports and currency image, not in reality. The current condition of the Philippines is not Strong Growth but Strong Penury.10 Kayzer Saba Page 2 7/4/2013
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Dr. Raul V. Fabellas lecture Ibid. 7 Ibid. 8 Ibid. 9 Ibid. 10 Ibid.

Peso Appreciation is a rhetoric endearment; it indeed benefits the nation especially the traded goods sector; however, peso appreciation is not a long-term solution to answer the sustainability and development of the Philippines economic status. A realistic proposal like a 6% appreciation increase per year from 2007-2010 and pressure on the price of staples [to remain affordable] should be done by analysts.11 The Ayala Corporation Treasurer and Managing Director Mr. Ramon G. Opulencia suggested that the government should tap off-shore markets and engage in projects with different banks; the government must not monopolize the projects and the market because these weaken the plans of private sectors.12 The Philippines should indeed team-up with different sectors especially in economic plans; however, every step should be analyzed and should benefit the majority; the plan should also be sustainable for if not, it will just be like Peso Appreciation, short-term without a projection of long-term effects. Dr. Francisco G. Dakila, Jr. of Bangko Sentral ng Pilipinas sees the importance of Peso Appreciation; Dr. Dakila suggested that the OFWs [being the primary source of appreciation], should be given benefits in order to sustain the Peso appreciation. OFWs shall be given opportunities like reduce in remittances charges and promote financial learning such as savings in investments; these projects are designed to motivate the regular remittances of OFWs despite low exchange rate to sustain the currency appreciation. If the peso is strong more investors will be motivated and the value of Peso will increase.13 It is right that the government do something to promote its temporary source of possible income, but a more defined long-term plan should be designed. Dr. Dakila suggested [for both long-term and appreciation] that the government should invest more in transportation infrastructures to encourage the traders in provinces, diversify the export products, and tap markets in Europe and Asia aside from the United States for Euro [for example], has a stronger currency.14 The reaction of Dr. Dakila is feasible but the government should be ready to invest in such proposals. The focus must not just be concentrated on the short-term appreciation but explore further possibilities. The Philippines has been a developing country for a very long time, at until the present it has no visible sign of becoming a developed or a fully-developed country. Policies being passed are just the same, just different in names and guidelines, but the same restrictions especially in threats against foreign diplomacy. The Philippines will not flourish if it will not risk investments in other possible ventures and if it will not try to be independent [at least in some decisions regarding economic polices] from influences of foreign countries. OFW Remittances should not be the only projected source of dollars; the country should not be dependent on remittances alone because its effects are not universal. Peso Appreciation is just a short-term solution to the Philippine economic crisis, and the government and experts should come up with a feasible long-term solution [or if not, at least medium-term that can be developed as a long-term project] to aid the Philippines. Projects of the past presidents and different government officials were promising, but since there were a lot of restrictions, the policies were not sustained for a long time; other policies flopped because the implementation was not based on the plan. The Filipinos should already comprehend with the lessons of the past, and initiate the change for a progressive future.

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Ibid. Reaction of Mr. Ramon G. Opulencia to the lecture of Dr. Raul V. Fabella 13 Reaction of Dr. Francisco G. Dakila, Jr. to the lecture of Dr. Raul V. Fabella 14 Ibid.